Evolving in Challenging Times: Siegfried Rises to the Next Level
The Siegfried Group reports sales of 845.1 million Swiss francs for the 2020 financial year, representing an increase of 1.4 percent in Swiss francs and 4.5 percent in local currencies.
Earnings before interest, taxes, depreciation and amortization (Core EBITDA) grew by 6.2 percent to 149.4 million Swiss francs. This corresponds to a Core EBITDA margin of 17.7 percent, a plus of 0.8 percentage points compared to the previous year.
Core net profit of 72.2 million Swiss francs is also higher than in the previous year (65.7 million), an increase of 10.4 percent.
Siegfried has signed a cooperation and supply agreement with the German company Biopharmaceutical New Technologies (BioNTech) for the aseptic filling (“Fill & Finish”) and packaging of large commercial quantities of the COVID-19 mRNA vaccine BNT162b2 (“Comirnaty”) and will thus make an important contribution to the global fight against the Coronavirus pandemic from mid-2021 onwards.
With the acquisition of two large Drug Products sites from Novartis in Barcelona with approximately 1’000 employees, Siegfried has implemented a significant strategic step.
The Board of Directors proposes to the Annual General Meeting to increase the distribution to the shareholders by 20 cents to 3.00 Swiss francs per registered share (previous year: CHF 2.80). This will be effected by reducing the nominal value as part of a capital reduction.
SIX: SFZN. The Siegfried Group achieved robust operating results in a challenging environment caused by the Coronavirus pandemic and proved that it can be successful and grow profitably even under adverse circumstances. In addition, with the acquisition of two pharmaceutical manufacturing sites from Novartis in Spain, Siegfried was able to make significant progress in implementing its corporate strategy EVOLVE, which will take the company into a new dimension and positively influence the business results already in the current year.
Sales in Swiss francs increased by 1.4 percent to 845.1 million (2019: 833.5 million Swiss francs). In local currencies, growth even amounted to 4.5 percent. Core EBITDA grew faster than sales to 149.4 million Swiss francs (2019: 140.7 million), an increase of 6.2 percent, corresponding to a noticeable growth of the core EBITDA margin to 17.7 percent (2019: 16.9 percent). Core net profit amounted to 72.5 million Swiss francs (2019: 65.7 million), a plus of 10.4 percent.
In view of the good business development and the very robust financial situation of the company, the Board of Directors proposes to the Annual General Meeting to increase the distribution to the shareholders by 20 cents to 3.00 Swiss francs. This will be effected taxfree for Swiss shareholders by reducing the nominal value as part of a capital reduction.
Siegfried CEO Dr. Wolfgang Wienand: “Siegfried achieved a robust operating result in a challenging environment and exceeded its own targets in terms of sales and margin. The company has also demonstrated to be capable of strategic action even in the midst of a global crisis, in an M&A environment that has largely come to a standstill. With the acquisition of two large Drug Products sites from Novartis in Spain, Siegfried has reached the next level and is now among the leaders in the CDMO market. I would like to take this opportunity to sincerely thank all employees of the Siegfried Group who helped to keep us well on track as a global team.”
Positive cash flow development
Operating cash flow for 2020 grew to 114.8 million Swiss francs, an increase of nearly 75 percent compared to the previous year, due to higher sales, higher profitability and the favorable development of net working capital. Investments in tangible and intangible fixed assets of 69.1 million Swiss francs are reported slightly above those of the previous year. Free cash flow amounted to 45.7 million Swiss francs (2019: 3.8 million).
Growth in both segments
Both, the Drug Substances business – the larger of the two segments – as well as the Drug Products business grew. Sales in Drug Substances grew by 1.4 percent to 647.8 million Swiss francs, while business in exclusive synthesis as well as in portfolio products developed positively. In Drug Products, growth amounted to 1.2 percent, corresponding to sales of 197.2 million Swiss francs. Siegfried’s business portfolio is well diversified with regard to customers and products and accordingly robust. The largest customer contributes only 6 percent and the largest product only 5 percent of sales, and the 10 largest customers together account for only 37percent of sales.
Coronavirus pandemic as a continuing challenge
The Coronavirus pandemic placed significant challenges in various areas on Siegfried and its employees. Thanks to early information also from our own site in Nantong (China), a crisis unit was put together as early as January 2020 and an updated pandemic plan set in motion, which had originally been developed for the SARS pandemic in 2002. The focus here was on our duty of care for our employees and their safety in the workplace. Also of paramount importance and a yardstick for our actions was our commitment, as one of the significant worldwide manufacturers of vital drugs and a company classified as systemically important, to maintain our production activities and supply capability with all our strength. In retrospect, the Siegfried Group has succeeded in this extraordinary effort to the largest extent. Although we did have downtimes in production and in our own supply chains, they have been kept within limits.
Contract with BioNTech
Last fall, we signed a cooperation and supply agreement with Biopharmaceutical New Technologies (BioNTech), a German pioneering company in the field of biopharmaceuticals and immune therapy. The agreement covers the aseptic filling (“Fill & Finish”) and packaging of large commercial quantities of the innovative COVID-19-mRNA vaccine BNT162b2 (“Comirnaty”). The vaccine, which BioNTech developed in cooperation with the US pharmaceutical company Pfizer, will be filled at Siegfried’s Hameln site from mid-2021 onwards. For this technically demanding task, Siegfried is investing in a dedicated production line and will provide specialized storage capacity. Up to 50 additional jobs will be created for this purpose. The contract with BioNTech runs in a first step until the end of 2022, with the joint intention to expand the collaboration into a longterm strategic partnership between the two companies.
Acquisition of two Novartis sites as a significant strategic step
Despite the uncertain environment caused by the pandemic, Siegfried took a significant step in implementing its corporate strategy EVOLVE in the year under review with the acquisition of two large Drug Products sites from Novartis in Barcelona. With about 600 employees, the site in Barberà del Vallès produces solid dosage forms including packaging and processes highly potent substances used in oncology and inhalation capsules for the treatment of respiratory diseases. With a total capacity of nearly eight billion units in Barberà del Vallès and Malta, the Siegfried Group has now achieved the necessary critical size in this segment. The El Masnou site with some 400 employees specializes in the production of ophthalmological drugs, such as sterile eye drops and eye ointments, as well as nasal sprays and other products. Together with the existing activities at our site in Irvine, Siegfried advances to a significant supplier of services and products in this market segment. As part of the acquisition, a longterm manufacturing and supply agreement was entered into, in which Novartis commits to source significant volumes of key products from both sites. In addition, Siegfried is awarded the status of a “Preferred Supplier“ of Novartis. This acquisition strengthens Siegfried’s global manufacturing network regarding capacity and technological skills, and it gives the company access to further profitable growth. The Drug Products segment, which formerly amounted only to about a quarter of total sales, will in the future contribute a significantly larger share to the Siegfried Group’s sales.
Siegfried with sales of well above one billion in 2021
For the current fiscal year 2021, we expect a significant jump in sales to well above one billion Swiss francs, driven by robust organic growth in all business areas and, in Drug Products, additionally driven by the acquisition of the two Novartis sites and the additional business with Coronavirus vaccines at the Hameln site. Siegfried’s profitability will thereby continue to increase towards the target range of a Core EBITDA margin of around 20%. We are looking to the mediumterm development of our company with healthy optimism and expect robust organic growth with a further stepwise expansion of our profitability.
The Siegfried Group has shown a high degree of resilience in the past year. Nevertheless, during the COVID-19 pandemic and the resulting global uncertainty, forecasts should generally be treated with a certain degree of caution.